Interpreting your paycheck stub is important to make sure you’re getting paid accurately. Here’s a quick step-by-step guide to understanding your pay stub.
If you’re like most people, when you get your paycheck, what you really care about is the bottom line—how much do you have to spend until the next one comes?
However, understanding your paycheck and occasionally reviewing your paycheck stub is a good idea. This is the best way for you to confirm that everything is correct and keep an eye on important things like deductions and tax withholdings.
Not sure exactly what to look for? This guide to reading your paycheck will tell you everything you need to know. Let’s get started!
Receiving Your Pay Stub
First, you’ll need to know where to find your pay stub. There was a time when your boss would hand you a paper check each payday, and the stub would be attached. However, most people now get direct deposit, which makes things a bit more complicated.
Many employers will email you a digital copy of your pay stub or provide you with a secure online site where you can log in and see it. If you’re not sure how to access your paystubs, ask your employer.
While all employers should provide paystubs regularly, they’re not required to do so under federal law. If your employer isn’t currently distributing pay stubs, suggest that he or she use a free pay stub template. This way, all of the employees will have the information they need, and your employer can ensure compliance with state laws.
How to Read Your Pay Stub
Once you have your pay stub in front of you, it’s time to get down to the nitty-gritty. While the format and style of pay stubs do vary a bit, they should all contain the same basic information. Here’s what you’ll want to look for.
Paystubs usually include basic information like your name, address, and the last 4 digits of your tax ID and/or your employee ID number. It should also show the time period that the stub references. Typically, this is one week, two weeks, or a month.
For each category of information that follows, pay stubs often include the amount for the period and a running year-to-date (YTD) total.
Your gross pay is the total amount of money you earned during the time period before anything was withheld. This should be your hourly rate multiplied by the number of hours worked (or your salary for that period) plus any bonuses or overtime pay.
For example, if you make $15 per hour and you worked 40 hours, your gross pay would be $600.
The “taxes” section of your paycheck is usually where the confusion starts since there are so many different types that you’ll see listed. The primary ones include:
- Federal income taxes
- State taxes
- Local/city taxes (if applicable)
- FICA (Federal Insurance Contributions Act)
The amount withheld for your federal, state, and local taxes is based on the Form W-4 that you filed with your employer. If you think too much or too little is being withheld, you complete a new form to make an adjustment.
Your FICA taxes cover your required contributions to the Social Security and Medicare funds. Each pay period, 6.2% of your gross pay is directed to Social Security. In addition, your employer also has to contribute 6.2% on your behalf. If you’re self-employed, you’ll have to pay the full amount—12.4%.
You’re also required to pay 1.45% of your income to Medicare, and your employer must match another 1.45%. Self-employed individuals are on the hook for the full 2.9%.
Unfortunately, there’s nothing you can do to change your FICA withholding as these amounts are federally mandated.
You may or may not have other deductions coming from your paycheck, depending on whether your employer provides you with many benefits. Some common deductions include:
- Insurance premiums (medical, dental, life)
- Flexible spending accounts (FSA)
- Health savings accounts (HSA)
- Retirement savings plans
Often, if an employer offers insurance, they’ll pay a portion of your premiums and require you to pay the rest. Your portion will come out of your paycheck on a pre-tax basis, meaning you won’t have to pay taxes on the amount you pay.
An FSA allows you to save pre-tax money to cover medical expenses. This includes prescription drugs, deductibles, and co-pays. An HSA is similar, but to take advantage of this, you must have a high-deductible health insurance plan.
If you contribute to a retirement plan, like a 401(k), the amount you contribute will show on your pay stub. If your employer provides a match, your pay stub will reflect their contribution as well.
Finally—the piece everyone is really concerned about – your net pay. This is your gross pay minus all of your deductions and is the amount that you’ll receive in your pocket when all is said and done.
If you’re receiving a direct deposit, the net pay listed on your pay stub should match the deposit amount.
Review Your Paycheck Stub Today
Now that you know the basics, it’s time to pull out that paycheck stub and take a look. You might be surprised by what you find! If you’re paying for deductions you don’t really need, or you want to increase the amounts you contribute, now is a great time to talk to your boss and make the appropriate adjustments.
Before you head out, though, take a minute to browse through a few more of our blog posts. We’ve got tons of great advice and entertainment news that you won’t want to miss!